Falling U.S dollar could give new shine to emerging market debt

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It could be time for emerging market debt to shine

Bonds from countries with emerging economies could see a banner second half of 2019 if the U.S. dollar stays weaker, as many anticipate, and investors turn away from trillions worth of sovereign debt offering negative yields.

“With U.S.-China trade conditions probably continuing as they are, we expect the U.S. dollar to weaken or, at best, be flat for the second half of the year,” Mariann Montagne, a portfolio manager at Gradient Investments, said in an interview. Analysts at J.P. Morgan put together the chart below to show how emerging market credit outperformed this year as U.S. yields fell, even as other assets turned negative when U.S.-China trade talks faltered in May.

 

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